China Warns Retail Investors of Crypto Pyramid Schemes

The Beijing Internet Finance Industry Association (BIFA) issued a notice on July 9, cautioning retail investors to be wary of pitchbooks that disguise traditional pyramid schemes with crypto terminology. The association highlighted that promoters have started advertising “stablecoin wealth plans,” “Web 3.0 dividends,” and similar offers that promise fixed returns, which are often indicative of illegal fundraising activities.

The circular released by BIFA outlined five key indicators of illegal fundraising: operating without a license, using technical jargon to exploit information gaps, issuing false guarantees, recycling new deposits to pay earlier participants, and cross-linking into fraud or money laundering. The association advised the public to verify a firm’s license through national regulators and to be aware that high returns often come with high risks. BIFA also reminded investors that China’s Regulation on the Prevention and Disposition of Illegal Fundraising holds the investor liable for any losses incurred.

The warning, which totals nearly 1,500 Chinese characters, was first published on BIFA’s verified WeChat channel. This alert comes in the wake of past frauds, such as the PlusToken wallet service, which collapsed in 2019 and gathered about 200,000 Bitcoin (BTC) and 9 million Ethereum (ETH). The amount was worth more than $4 billion at 2020 prices, making it one of the largest Ponzi schemes using crypto buzzwords. The episode demonstrated how promoters can migrate coins across exchanges and mixers before liquidation, pushing enforcement into a multi-year pursuit.

Despite China banning direct crypto-to-fiat exchange services in 2021, domestic interest in crypto persists through offshore platforms and grey-market on-ramps. Regulators in major cities have released consumer notices on token scams this year, reflecting the ongoing concern over such activities. The warning from BIFA is likely a response to the accelerated retail speculation on mainland social platforms, where an unofficial “stablecoin concept” stock index has seen significant gains. Market interest has also been driven by incoming stablecoin rules in China Hong Kong, as large technology firms explore renminbi-pegged tokens.

Reports have surfaced that domestic blogs have begun promoting “USDT mining pools” and “insured CNH stablecoins,” prompting local regulators to prepare enforcement actions. BIFA’s statement concludes by publishing its hotline and recommending that investors who identify unlicensed activity report it to the police or financial supervisors. The association adds that it will forward credible tips to provincial task forces that track unlawful public fundraising.